2018 (11) TMI 51 - HC - Income Tax

The appeal is admitted on the following substantial questions of law - (i) Whether under the facts and the circumstances of the case and in law the learned ITAT has not erred in reversing the decision of the learned CIT (A) and holding the amount remitted by the appellant to be in the nature of royalty as per provision of Section 9(1)(vi) of the Income Tax Act, 1961 as well as Article 12 of the India-Isreal Double Tax Avoidance Agreement and there by holding the Appellant as Assessee in default for not deducting TDS under Section 195 of the Act? Issue notice to the respondent. Rule is made returnable by eight weeks. No ground for grant of anyinterim order. The stay application is accordingly dismissed.

Summary

Issues involved:
Interpretation of tax law regarding royalty payments and TDS deduction under Section 195 of the Income Tax Act, 1961.

Detailed Analysis:

1. Substantial Question of Law:
The appeal was admitted based on the substantial question of law regarding whether the ITAT erred in reversing the decision of the CIT (A) and holding the amount remitted by the appellant as "royalty" under Section 9(1)(vi) of the Income Tax Act, 1961 and Article 12 of the India-Israel Double Tax Avoidance Agreement. The issue also pertained to the appellant being considered an "Assessee in default" for not deducting TDS under Section 195 of the Act.

2. Legal Precedents:
The appellant's counsel relied on various judgments of the High Court of Delhi, including cases such as Director of Income-tax Vs. Ericsson A.B., Director of Income-tax Vs. Nokia Networks OY, Commissioner of Income-tax Vs. ZTE Corporation, and Director of Income-tax Vs. Infrasoft Ltd., to support their arguments.

3. Court Proceedings:
After hearing the appellant's counsel and examining the material on record, the High Court found no grounds for granting any interim order. Consequently, the stay application was dismissed. The court issued notice to the respondent, making the rule returnable within eight weeks for further proceedings on the matter.

This detailed analysis highlights the core issues addressed in the judgment, focusing on the interpretation of tax laws related to royalty payments, TDS deduction, and the application of legal precedents to support the appellant's case.